The plant’s natural gas fuel supplier is Coral Energy, which has a tolling arrangement for
the 250 MW of its power sold in the US market. Coral Energy is the AAA-rated trading arm
of Shell, InterGen’s 68-per-cent owner. The fuel will be supplied through the North Baja
pipeline, a joint venture between two potential customers of the plant, PG&E Corporation and
Sempra Energy.
The 310 MW La Rosita II plant is an entirely merchant facility that will sell power
through Coral Energy into the Californian market. It therefore has a considerably higher risk
profile than La Rosita I, with its CFE contract. The bank financing addresses the varying level
of merchant risk through an innovative borrowing base approach that limits leverage and dis-
tributions (after the plants begin to operate), based on proportions of contracted power and
forecast power prices. Leverage will be 75 per cent for La Rosita I but just 50 per cent for La
Rosita II. Thus US$625 million is the maximum commercial bank commitment. The amount
of loans that can be drawn at a given time is calculated according to a borrowing base deter-
mined by the respective leverage of the two power plants.
InterGen’s long-term strategy is to build a national energy company in Mexico, continu-
ing to bid on CFE projects but always adding value through factors such as industrial and
export sales.
TEG I
Termoelectrico del Golfo I (TEG I) is an ‘inside the fence’ project costing about US$370 mil-
lion. The plant is located in Tamuin in the central Mexican state of San Luis Potosi.
The project is sponsored by Sithe Energies, Inc., ABB Alstom Power and Cemex. The
sponsors have put in place wheeling arrangements with the CFE so that the project can trans-
mit power to 12 Cemex cement plants. Wheeling is the movement of electricity from one
system to another over the transmission facilities of intervening systems. Wheeling is
required to offer customers a choice of electricity suppliers. The project will sell surplus
power to the CFE.
Sithe is the largest non-utility IPP in the United States. The company has no political
risk insurance on its equity. Robert Kartheiser, Sithe’s senior vice president for Latin
America, believes that political risk in Mexico today is manageable, based on recent struc-
tural and economic changes, increasing integration with the US economy as a result of
membership of the North American Free Trade Area, and Vicente Fox’s victory in the pres-
idential election in July 2000. In the past Sithe has followed an opportunistic worldwide
IPP strategy. More recently, its shareholders have decided to focus on Canada, Mexico, and
the United States.
ABB Alstom is a turbine manufacturer based in Belgium. The banks lending to this pro-
ject were concerned that the clean-burning, fluidised bed technology that ABB Alstom
planned to use in the boilers was, although not completely new, an extension of an existing
technology. Further, this technology had never been employed in such a large plant. To allay
their concerns the lenders became comfortable with ABB Alstom’s reputation and negotiat-
ed an acceptable level of liquidated damages under the engineering, construction and pro-
curement contract.
Cemex, the power offtaker, is one of the largest industrial companies in Mexico and
the third largest cement maker in the world. TEG I represents a strategic measure for
Cemex to manage its long-term cost of electricity, which accounts for about 20 per cent of
BAJIO, LA ROSITA AND TEG, MEXICO